I recently had a discussion on Facebook with another investor and they were talking about the “Contract Crusher” online software offered by FreedomSoft. These guys are expert marketers because they do a great job getting their information in front of everybody myself included. So, I have to admit I was intrigued by their offer to provide this free “Contract Crusher” software. Their marketing makes it sounds like Contract Crusher will revolutionize how quickly you can create and send contracts.
Well, I checked it out, and quite frankly I was not impressed. Their software gives you the ability to upload a contract to their online portal and then point and click where you want to add your information to the contract. They do have a nice feature that allows you to email or fax the contract right from the web portal, but here’s why I’m not impressed. If you have your contracts written up in Microsoft Word (or any other word processor software for that matter) you could do the same thing by putting the information in with text boxes…that’s essentially all they’re doing. I’m not sure how this makes it more efficient for you. And, if you’re a little more savvy with Microsoft Word you can create a “Form”, and then you’ll just be able to tab between each of the fields to fill the information in.
So all things consider, I’m giving Contract Crusher a failing grade. I also think I have a better way for you to create your contracts because my method AUTOMATICALLY fills out your contract while you complete your due diligence on the property.
When I take a look at a property I start off like many do taking a 30,000 foot view of the property. For instance, if we’re looking at a rehab property I use the following formula:
Purchase Price = 65% x ARV – Repairs
If I think the seller may accept a purchase price given by this equation then I’m going to do a more in-depth analysis. I start a property analysis using an excel spreadsheet I created. The spreadsheet is organized with the following 5 tabs:
- Tab 1 – Property Information – Includes property address, seller name and phone number and date of analysis
- Tab 2 – Property Inspection – Includes property inspection report including summary of required repairs. The output of this sheet is an estimate for the total cost of repairs including labor
- Tab 3 – Comparative Market Analysis – Includes information about subject property, data on sold properties, pending properties and listed properties. The output of this sheet is an estimate for the After Repair Value (ARV).
- Tab 4 – Property Cashflow – Even if the primary exit strategy is a rehab we always do a cashflow analysis in case we “get stuck” with the property. The output of this sheet is the cashflow the property will generate if rented.
- Tab 5 – Rehab Analysis – This tab includes a summary of the purchase costs, holding costs, repair costs, & selling costs associated with the rehab. The output of this sheet is the maximum purchase price and the expected Return On Investment (ROI) for the rehab.
Now, we have a standard contract for purchase that we use, and it requires that we fill in the following information:
- Seller’s Name
- Property Address
- Purchase Price
Well, it occurred to me that for every property I analyze that I have already input this information into my analysis. So, I created a 6th tab with the purchase agreement on it. The power behind this is that I can link the cells in the purchase agreement to the other 5 tabs and as I fill in my analysis on the property the purchase agreement is AUTOMATICALLY filled in. For example, in the area of the contract where the property address needs to be filled in, I just pull this information from Tab 1, and the purchase price is pulled from Tab 5, etc. If the analysis I put together looks good, then I just print the purchase agreement and fax it, or I can print it to a PDF and email it.
One more thing I should mention is that I even went so far as to add my signature to the document. To do this I simply signed a piece of paper and scanned it in using my scanner. Once scanned in, I was able to save it as a picture file. Then I just inserted the picture into my purchase agreement tab in Excel. It took about another 30 seconds to crop, resize and move the signature to the right spot on the contract, but now I have a contract that fills itself out and is already signed.
My next step is to put together additional contract that I frequently use and have them automatically populated as well. (Assignment of contract, mutual release agreement, contract addenda, etc.).
I think the guys from FreedomSoft had the right idea to take this to a web application, but perhaps they should redirect some of their marketing dollars to create a piece of software that has a little more capability…currently I’m not impressed…